ITU Economics cordially invites you to attend the following Economics PricewaterhouseCoopers-İTÜ Economics seminar:
Date & Time: May 12, 2017, Friday, 11:00AM.
Location: Room F237 - ITU Faculty of Management, Maçka 34367 Istanbul
Speaker: Selva Demiralp (Koc Universitesi)
Title: The impact of negative interest rates on bank balance sheets:Evidence from the euro area
In June 2014 the ECB became the first major central bank to lower one of its key policy rates to negative territory. The theoretical and empirical literature on the role of banks in monetary policy transmission is silent on whether their reaction would be different when the policy rate is lowered to negative levels compared to a standard reaction to a rate cut. In this paper we examine this question empirically by using individual bank data for the euro area to identify possible adjustments by banks triggered by the introduction of negative interest rates through three channels: government bond holdings, bank lending, and wholesale funding. We find evidence that there is a significant portfolio adjustment during the negative interest rate period, as banks tend to hold more non-domestic bonds, extend more loans and rely less on wholesale funding.